In an interview with Bloomberg, Saudi Arabia’s crown prince Mohammad bin Salman discussed the kingdom’s economy and reforms, three years after he launched his sweeping economic measures.
He said in reply to a question if he would have done anything differently three years ago, the crown prince said: “Yes of course there is. Any government, any company, any team, they will learn over time. As any human works, of course there will be a few mistakes and a lot of achievements, if he is heading in the right direction. So I believe the last three years were good, and that we couldn’t do anything more than what we’ve done. We learned a lot of things – the whole team, the whole system. We will continue progressing and developing in that area, but the main picture, the main targets, the plan – it’s there. We are continuing to develop it and continuing to work in the same direction, so there’s no change on that.”
Mohammad bin Salman said he aims very high. “Yes of course. You have to move the morale of people, the employees, the ministers, the whole area. You have to move the morale and you have to put them really under huge pressure. If you aim low, that means it’s an easy target. That means no one will try to work hard to achieve it. You have to aim high and you have to try to achieve as much as you can, and we said that clearly. We aim high. If we achieve 100 percent, great. If we achieve more, even greater. If we achieve 50 percent, great! Better than achieving nothing. So there is no problem in aiming high,” he said.
He stood by his promise to balance the budget in 2023, though earlier he targeted 2019.
Saudi crown prince said: “We have advice from a lot of banks, a lot of entities, including the central bank, the World Bank, that you can spend more money in the economy, so why delay that spending. Spend that money. We’ve reworked our strategy and that’s why we moved it to 2023 to raise our budget and to spend to be sure there’s job creation, economic growth and investment in Saudi Arabia.”
Regarding statistics on unemployment and that it is on the rise, Saudi crown prince did not hide from revealing the figures, saying: “Yes, and now it’s about 13 percent. But of course, if there are two years of restructuring the economy, of course you will have side effects. You cannot do the restructuring without the side effects. This is part of the side effects of restructuring the economy.”
He added: “But today we are much more powerful. Today, we talk about the budget of 2019. It’s above 1 trillion riyals for the first time in Saudi Arabia. And it’s 1 trillion and 100 billion riyals. We have our non-oil income or revenue raised by 300 percent. So from 100 billion riyals to 300 billion riyals, etcetera. So there is huge achievement that allows us to deal with the other issues from today and beyond.”
Mohammad bin Salman believed that the unemployment rate will start to decline from 2019 until it reaches 7 percent in 2030 as targeted in the Vision 2030.
The Saudi crown prince went into the numbers regarding the job market and said, it’s really interesting: “So if you see the male unemployment rate, it’s between 5 to 6 percent, which is almost close to normal. But if you look at the female unemployment rate, it’s above 20 percent. We don’t know how much of it is real unemployment and women seeking jobs, and non-real job seeking by women. So now we have a lot of programs to welcome those demands, and that will clarify a lot of numbers and we believe job creation will start from 2019, maybe late 2018.”
Mohammad bin Salman said on the role of the private sector in Vision 2030: “The number that we look at in the government is how much we spend for employees in the government budget. So in 2015-16, it’s almost 50 percent of our budget is employee salaries and etcetera. Today, it’s 42 percent if I’m not mistaken. In 2020, I believe it will be below 40 percent. And the main target in 2030 is to be around 30 percent of government spending on government employment.”
He added: “So the size of that spending doesn’t matter to us since it’s below 40 percent and it’s close to 30 percent in 2030 because our budget, our spending, is rising much much more than our spending on government employees.”
He emphasized that Saudi Arabia still needs to create a lot of jobs because of the needs in the country, in the army, in the security agencies, in education – especially education – and also in other sectors that are being newly created in sports and different areas.
Mohammad bin Salman said: “So the economy, the country, the people, need these services, so of course we’ll create these jobs. And we believe that the job creation in the private sector will also grow with time.”
“Today we have a good percentage. I’m not sure of the exact percentage, but I believe it’s almost 50 percent of government employees and non-government employees. But if you look at the other GCC countries, it’s a totally different number. So today we are in a good situation. I believe in 2030 it will be lower than that. So if you watch the next two years, you will see that we are going in the right direction, but it wouldn’t happen today,” Saudi crown prince says.
When asked about his measures curbing corruption, making arrests and whether that have affected the confidence of investors, Saudi crown prince said: “It created a lot of rumors, but I don’t believe that it affected that. At the end of the second quarter of 2018, the net foreign investment in the Saudi stock market increased by 40.4% compared to the same period of 2017.”
He said that foreign direct investment may have been affected at the beginning of his reforms, but now it is the opposite case, saying: “Yes, it went down 80 percent in 2017 from 2016. But 2018 it will be 90 percent more than 2017. This is the number that we are getting for the first half. It will include all the investments. And the 80 percent reduction in 2017, it’s because we believe the deal, the acquisition that the Kingdom company did with Bank Saudi Fransi, it bought shares of foreign investors, so a lot of money went out because of that deal.”
Mohammad bin Salman added: “And just to point out one number. In 2017, direct investment around the world went down more than 20 percent… But let’s look to the 2018 numbers. It’s above 2017 by 90 percent. So that means we are going in the right direction.”
Amazing deal will be announced in the coming two weeks
Saudi Arabia’s crown prince revealed to a question related to foreign direct investment in non-oil sectors that a big announcement is due in two weeks: “We believe it’s both (oil sector and non-oil sector). We believe we will have an amazing deal in October, in two weeks from today. So it will be big numbers. It will be in FII [The Future Investment Initiative conference] and it’s far away from oil. This deal is just what’s happening in Saudi Arabia – so there is one deal in FII and there are other deals that will be announced there.”
The ambitious deal he hinted may be is related to technology, refusing to give more details.
Encouraging investors to the kingdom, Saudi crown prince said that now 100 percent ownership of foreign investments, especially in retail is allowed in Saudi Arabia, revealing as an example that US tech giant Apple will open a store soon in Riyadh.
Aramco IPO money will go to PIF
To a question whether Aramco ownership would be be transferred to the PIF (Public Investment Fund), the Crown Prince replied in the negative: No. Aramco’s ownership will continue to be in the hands of the Saudi government, but the money of the IPO will go to the PIF.
Regarding the 2016 policy regarding PIF investment strategy, which was to utilize its funds 50% investments domestically and 50% globally, excluding Aramco, he said: “Now it’s more than 50 in Saudi Arabia and less than 50 outside Saudi Arabia that’s why we are investing in more places next year.”
Asked whether PIF will be part of the $100 billion fund that SoftBank was seeking, the Saudi Crown Prince said: “Of course. Definitely. We are the creators of SoftBank Vision Fund. We have 45 percent. Without the PIF, there will be no SoftBank Vision Fund.”
He said they are investing another$45 billion bring the total investment into the SoftBank Vision Fund to a total of $90 billion.
“That means we have a huge benefit from the first one. We would not put, as PIF, another $45 billion if we didn’t see huge income in the first year with the first $45 billion.”
When asked how much was the percentage profit from the first investment of $45 billion, he replied: “Masa once announced the number in the last FII that we did more than 20 percent in the first five months, so you can imagine!”
When asked if he was happy with the outome, he said: “Of course!”